The individuals in socialistic society surrender their economic freedom in exchange of assurance of freedom from wants by the State. It is the responsibility of the State to provide food, lodging and clothing besides other requirements, by assigning a suitable job to each one of them.

Characteristics of Socialist Economic System

Following are the Characteristics

In socialism means of production are owned by the State

Economic activities are planned by the central planning authority

Absence of competition

Equal opportunities to all

No economic freedom to the people

Advantages and Disadvantages of Socialism

Following are the merits and demerits, advantages and disadvantages of socialism.

Absence of monopolistic practices

One of the benefits of socialism is that it is free from monopolistic practices to be found in a capitalist society. Since under socialism all means of production are owned by the state, the exploitations by the monopolist are absent. Instead of private monopoly, there is state monopoly over the productive system but this is operated for the welfare of the people.

Absence of business fluctuations

A socialist economy is also superior to a capitalist economy that is free from business fluctuation. Generally planned economy co-ordinates the action of various producing units, prevents discrimination between saving and investment and make full use of available resources. It is able to control over production and avoid general deflationary trend.

Economic Growth

I will consider economic growth as an important advantage of socialism because it adopts economic planning as a means of promoting rapid economic growth. A planned socialist economy functions right according to the plan in a systematic and orderly manners and marches rapidly on the road to economic progress.

Disadvantages of Socialism

Following are the demerits or disadvantages of socialism.

Elimination of Individualism

There are many disadvantages of socialism but first come in my mind is the lack of economic freedom. In socialist economic system everything is controlled by a centralized body. Individuals are not allowed to own any assets, everything belongs to the state. Workers are assigned specific jobs and are not allowed to change them without consent from the planning authority.

Red-Tapism and Inefficiency

In socialism there is a lot of involvement of bureaucracy and are the drivers of all economic machinery. The work civil servants are not comparable with the private entrepreneurs. Civil servants merely do the jobs because it is their duty and they will get paid whatever the consequences. Thus inefficiency arises and in the long run the economy suffers.

An Artificial System

As a socialist economy is a planned economy, every aspect of the economy is to be determined by the government. Forces of demand and supply do not apply which is one of the disadvantages of socialism. Thus in the long run the economy becomes state rather than wasted, whereas these make an economy prosper.

Consumers Suffer

In the final analysis it is the consumer who loses out. Sovereignty of consumer does not apply in a socialist economy. Consumers do not enjoy the status of a consumer as in a capitalist economy. Choices of goods and services are able to maximize their total satisfaction.

Economic Equality

Socialists claim more equal distribution of wealth but practically it is proven that complete economic equality is virtually impossible. There is a distinction between the rich and poor. Moreover since it is a planned economy the poor suffer even more.

Non-existence of economic and political freedom

Freedom of enterprise, freedom in choice of occupation and many other essential freedoms for an economy to prosper are out‑rooted from society. The true spirit of democracy dies away. The basic needs Although it has been agreed that the six basic needs in life are met within a socialist economy but all this is obtained at the expense of economic and political freedom.

Non-existence of Competition

It is due to competition that an economy becomes prosperous. The competition between producers and consumers leads to the production of a good quality product which may even be relatively cheap here it is one the disadvantages of socialism. Thus talents and initiatives of mankind develop and in the ultimate analysis the country incurs rapid growth.